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How Much House Can You Really Afford?

I'm at it again. I'm daydreaming that a move from the city to the suburbs will save me a boatload of money. The trouble is I'm having a tough time wrapping my head around how much house I can afford since homeownership has so many hidden costs. The last thing I want to do is wake up in a four-bedroom colonial and find I can't afford to heat it or maintain the lawn.

I should also add that when it comes to moving to the suburbs, I have no intention of stretching my budget. I plan to live well below my means. If I have to give up city living, which I adore, I want to have plenty of money left over after paying my mortgage for vacations, nights out with my husband and summer camp for my daughters.

I called Ellen Klein, a northern NJ-based real estate agent with Century 21, to help me crunch the numbers. When I explained what I was trying to accomplish, the first thing she did was warn me that suburban living wasn't cheap. Despite my disappointment, I asked her to walk me through all the potential housing costs a typical family should add into their budgets. Here's what she said:

The Price of Ownership
Families first need to figure out their monthly housing payment. This includes your mortgage and taxes. If you can't come up with at least a 10% down payment, you'll also have to pay private mortgage insurance (PMI).

Since I'm trying to spend less in the suburbs than I do in the city, I'm looking to buy something that's priced lower than what I'll eventually fetch for my current apartment. In my fantasy world, I'm even toying with the idea of having no mortgage at all.

In New York, I spend very little on my utilities. I don't pay for heat and it doesn't cost much to illuminate or cool four rooms. In a house, I imagine I'll have to write some larger checks. To avoid any huge surprises, potential buyers should always ask a seller how much he or she allocates for these expenses, says Klein.

The Extra's
City dwellers and first time homeowners are often surprised to learn that they may have to pay for a handful of other services beyond basic utilities, including garbage hauling, water and sewage. If you're not the do-it-yourself type, you'll also have to pay someone to mow your lawn and plow your driveway. While these services aren't terribly expensive, they do start to add up.

The Money Pit Factor
Last week my sister woke up to find 18 inches of water in her basement. As she complained about how much it was going to cost her to make repairs, I kept thinking how tough it must be to budget for such unexpected costs.

Klein again warned me that families constantly need to worry about things breaking in their homes. She recommends homeowners budget $200 to $300 a month for unexpected maintenance.

Finally, buyers moving from the city to the suburbs also have to include in their budgets the total cost for two cars (loan payments and insurance) and their commute to work. Sure, this isn't exactly part of homeownership. But it needs to get factored into the math since transportation typically consumes a large chunk of a suburban family's paycheck. For 2009, the typical annual insurance premium in New Jersey was around $2,500.

When I think about the cost of sending two kids to private school in Manhattan, I still figure I'll end up spending less in the suburbs than if I stay in the city. But I think I may have to adjust my so-called fantasy or get used to the idea of living in a much more modest home than I initially imagined.

Anyone else thinking about moving to the suburbs to save money? Or, have you already moved? If so, are you actually spending less?

Spirit of Memorial Day Roses image by Sister79, CC 2.0.